Why are ASX 200 energy shares smashing the benchmark on Thursday?

Santos and Woodside are both charging higher today.

| More on:
An oil refinery worker stands in front of an oil rig with his arms crossed and a smile on his face as the Woodside share price climbs today

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • ASX 200 energy shares are widely outperforming today
  • Oil prices are up overnight following a significant production cut agreement from OPEC+
  • The reduced output may remain in place for more than a year, unless market conditions materially change

ASX 200 energy shares are enjoying another strong day today.

In afternoon trading, the S&P/ASX 200 Index (ASX: XJO) is down 0.11%, having recovered from some steeper earlier losses.

The S&P/ASX 200 Energy Index (ASX: XEJ), on the other hand, has been trading solidly in the green, currently up 2.13% for the day.

Leading ASX 200 energy share Santos Ltd (ASX: STO) is up 1.64%, while shares in competitor Woodside Energy Group Ltd (ASX: WDS) are up 2.58%.

What's driving investor interest in these ASX 200 energy shares?

Woodside and Santos both look to be benefiting from a boost in oil prices.

The Brent crude oil price is up 1.8% over the past day to US$93.60 a barrel. Brent hit six-month lows of US$84.06 on 26 September amid fears of a global slowdown impacting demand.

But it seems the rebounding oil price has little to do with resurgent demand. Rather it comes following the latest output decision from the Organization of Petroleum Exporting Countries and its allies (OPEC+).

What did OPEC+ decide?

If you own ASX 200 energy shares, you may wish to tip your hat to the OPEC+ members.

Though not everyone is happy with the cartel's decision.

Yesterday (overnight Aussie time), the group agreed to reduce their combined oil production by two million barrels per day, commencing in November. That represents their biggest supply cut in two years.

As Bloomberg reports, Saudi energy minister Prince Abdulaziz Bin Salman said the reduced output levels will remain through the end of 2023, unless there are material changes in the market.

Nigerian minister of state for petroleum resources Timipre Sylva said falling oil prices would destabilise some of the members' economies. He added, "OPEC wants prices around $90."

While that price offers ASX 200 energy shares like Santos and Woodside a healthy profit margin, the United States government was quick to voice its displeasure.

The White House stated:

The president is disappointed by the short-sighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin's invasion of Ukraine.

Brent crude prices topped US$120 per barrel in June this year, sending ASX 200 energy shares like Santos and Woodside sharply higher.

Year to date, the Santos share price is up 22.6% while Woodside shares have soared 58% higher.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

A young man punches the air in delight as he reacts to great news on his mobile phone.
Energy Shares

Macquarie tips 23% upside for this ASX All Ords mining stock

Let's see why the broker thinks this stock could be a top buy.

Read more »

a group of three electricity workers stand smiling wearing hard hats and high visibility vests in front of an array of high voltage power equipment.
Energy Shares

Macquarie raises price target on Origin Energy shares

The broker just raised it's price target. Here's why.

Read more »

A smiling woman holds a Facebook like sign above her head.
Energy Shares

Bell Potter says this ASX 200 uranium stock is a top buy

Let's find out why the broker is feeling bullish on this stock.

Read more »

Worker on a laptop at an oil and gas pipeline.
Energy Shares

Boss Energy shares have surged 93% since April. Here's what Macquarie expects now

Boss Energy shares remain a favourite for ASX short sellers. Are they in a for a payday or headed for…

Read more »

A young man wearing glasses writes down his stock picks in his living room.
Energy Shares

3 reasons to buy this beaten down ASX 200 coal stock today

A leading expert forecasts a big potential rebound ahead for this quality ASX 200 coal stock.

Read more »

Female miner uses mobile phone at mine site
Energy Shares

Here are the latest growth forecasts for the Pilbara Minerals share price

Can investors charge up their returns with this ASX lithium share?

Read more »

An oil worker in front of a pumpjack using a tablet.
Energy Shares

Top 5 ASX 200 energy shares of FY25 amid a challenging year for sector

The energy sector was the weakest of the 11 market sectors in FY25.

Read more »

An oil worker on a tablet with an oil rig in the background.
Energy Shares

Buying Woodside shares? Here's the latest oil price forecast from Goldman Sachs

Here’s what Goldman Sachs is forecasting for the oil price in the year ahead.

Read more »